The market’s exploding today on news that sales of existing houses were up 5.2%. The end of the recession! Hooray! Okay, but these happy campers aren’t looking at the figures. 30% of the sales were short sales – sales for less than the loans owed on them. 9.24% of all mortgages in this country are delinquent, with an additional 4.3 per cent already in foreclosure. That combination, 13.5%, is the highest rate of delinquency since record keeping of such matters began in 1972.
Foreclosures in Massachusetts were initiated in July at a rate 5X greater than in July 2008. Similarly, foreclosures in Rhode Island are “rampant”. That huge jump in Southern California homes came about from the average price dropping 23% from last year, with foreclosure sales representing over 45% of all sales. Seeking Alpha looks at the huge default rate on prime loans: good credit, 20% down, etc. and fears the future because these are defaults caused by unemployment, not just the inevitability of poor folks who never could afford the home the government urged them to buy:
As you can see, everything is fine, no problems at all. The markets are sure to continue its steepest market rally ever rising 49% since march, outpacing the 1929-1933 44% rally. I guess the new normal of a high unemployment, revenue-less, earnings-less, and growth-less recovery means that the markets can have the greatest percentage gain ever, in only 5 months, and should continue forever. I am kidding of course, this thing looks ugly and makes me question what is really going on.
So take what you want from today’s euphoria. Personally, I have certain amount of respect for Wall Street players to make money, but almost none for their ability to see past the day’s trading horizon. I think someone’s going to be proved a chump here, and soon.